The morality of some school boards has been brought into question after it was discovered they have been spending tax-payers' money on traffic fines, satellite TV subscriptions and contracting companies owned by their trustees.

The Auditor General's report on the education sector, based on audits carried out last year, highlights that there are at least a few schools in serious financial difficulty and 200 with a working capital deficit.

The "audit reports mentioned matters concerned with probity, prudence, or waste", such as Tauranga's Te Kura Kaupapa Maori o te Kura Kokiri, which spent money on an overseas trip to the Cook Islands, shipping clothing and household items overseas and for tyres and repairs on vehicles not owned by the school.

Expenditure such as this was viewed to be personal and showed a “lack of probity” by the board, the report by Auditor General Lyn Provost stated.

Some schools which breached the Education Act included Palmerston North's College Street Normal School, which contracted a company owned by one of its trustees to carry out $87,000 worth of building and repair work, without the Education Ministry's approval.

Rotorua Boy's High School and Northland College were viewed to be in serious financial difficulty, with the latter borrowing $274,000 more than it was permitted and acquiring $436,000 in company shares without approval.

In total, 33 schools borrowed more than they were legally permitted, 16 gave loans to staff and 10 had conflicts of interest, including Sacred Heart College in Auckland.

The country's 2250 schools have an operating expenditure ranging from $200,000 to $20 million.

While some were found to breach the Education Act, Provost said most schools' financial statements showed they were financially sound.